Reverse policy or pay interest on cash reserve, shareholders tell CBN

Shareholders are agitating that the CBN should either reverse its policy on the Cash Reserve Ratio requirement or pay interest on the money taken. In this interview, shareholders maintain that banks are lending institution meant to lend money and not to keep money.

The Central Bank of Nigeria, CBN, headquaters, Abuja

Mr. Adebayo Adeleke of Independent Shareholders Association of Nigeria ISAN : When the CBN says 20 per cent and they are locking up the money, banks don’t have access to it, neither are they paying any form of interest on it. It is a double jeopardy situation for the banks because banks are paying to NDIC for insuring the same fund over everybody that has deposited. So when the owner of that money comes, the bank is meant to pay the owner interest on the whole sum, while 20 percent is held by CBN.

There are instances where CBN lend money to the banks and they collect interest, so if they are taking 75 percent of public sector fund and 20 percent of private sector fund and they are putting it in a cash reserve, I see no reason why they should not pay interest on the money, because we are talking about huge amount of money that banks don’t have access to, they can’t trade with it, they can’t lend it out, they are not making any form of profit from it.

We are not happy with it and we believe that they should be able to reverse that kind of policy. If Securities and Exchnage Commission, SEC who is suppose to be a regulator turns blind eyes, the shareholders who are the owners of the business have the right to shout. We want them to reverse that policy or they should pay interest on the money, that is all. If they want to help us to keep part of the money, then they should give us intersect, because those who deposited the money will collect interest from the bank.

Mr. Boniface Okezie If the banks are keeping money as cash reverse instruction from CBN, and they cannot use it to run businesses who does it profit? The shareholders are not profiting from it, neither does it make any gain for the banks because the banks are meant to lend money. If they have such amount of money and it is in reserves with the CBN doing nothing, so who is going to gain at the end of the day? The loser becomes the banks.

But if the money is with the banks and they deploy it into their businesses, there will be growth and earnings .The more earnings the banks make transform to profitability and it will lead to sharing of dividend to shareholders but if the money remains untouched and they are not utilising it, it profits nobody and the banks will be at the losing end and the CBN does not pay them interest on what they have, so the money is just lying fallow.

CBN should allow the banks to deploy those fund and lend out, that is the only way they can grow their business, but if the money still remains with the CBN and the banks are not making use of it, it’s not healthy for the institutions and shareholders will continue to bear the brunt because we have the money but the bank can not deploy it to do business and grow their earnings so as to maximise returns to their shareholders.

Even if the banks have so much fund with them the issue of mismanagement will not arise because CBN regulates them. If the banks are giving loan, there is a limit they can give out. If the customers are begging the banks to lend to the real sector and they are not lending, as a lending institution the banks are meant to lend money and not to keep money.